Archive for June, 2007

Every once in a while I am asked questions regarding the possiblity of converting a Virginia corporation to a Virginia LLC. Corporate owners sometimes want the benefit of the relaxed requirements of operating an LLC (no required annual meetings, no required annual report, less expensive SCC renewal fees, etc.) but don’t want to go through the hassle of dissolving their corporation and reforming as an LLC because of the expense, difficulty, legal risks, etc.

The answer is that you may convert your Virginia corporation to a Virginia LLC without shutting down and starting all over (see VA Code section 13.1-722.9 if you don’t believe me). To accomplish this, you must file Articles of Conversion which need to contain a detailed conversion plan for your stock (how you’re going to convert the stock of your corporation into membership units of the LLC). You must also include Articles of Organization for the resulting LLC as an attachment. It’s a bit complicated to get all of these documents done correctly, so you may want to use the services of an attorney that has done this before to get it done properly and efficiently.

One of the nice benefits of converting rather than shutting down and forming a new LLC is that under the Virginia Code (section 13.1-722.13), there was no interruption of the company (and therefore your limited liability never lapsed).

One thing to note, as well, is that it works the other way, too – a Virginia LLC can convert to a Virginia corporation (see VA Code Section 13.1-1010.4). Not sure why you would want to do that, though…

The Richmond Times Dispatch has an article regarding a Michigan company that was sending food service businesses around the country an official-looking notice concerning the need for proper hand washing signs for employees and offering to sell such signs to the business.Â Apparently, the notice was deceptively designed to scare business owners into buying signs from this company, even though such signs can be simply made or obtained for free from the government.Â Several States took the company to court to force changes to the mailings and obtain refunds for misled customers.

When you start and run a business, you will receive mailings from official-looking sources that are, in my opinion, deceptive.Â While I have not seen a mailing from the company mentioned in the article, I have seen several from companies selling labor posters (minimum wage requirements, FMLA, etc.) that try to appear as if they are coming from the government and offer to sell posters to the recipients.Â While the mailings are sometimes accurate in that certain notices are required to be displayed, what the mailings fail to tell you is that you can obtain the correct posters for free from Virginia and the federal government.

When you receive mailings purportedly from government agencies or departments you have never heard of with a request to purchase something, view them with skepticism and do your research before sending in your check.

Are you in a rush to have your Virginia LLC or Virginia corporation approved or to receive approval to transact business in Virginia?Â The typical processing time at the State Corporation Commission is 17-21 days, which may be too long when you have a contract awaiting signature or an opportunity that has a deadline.

To speed things along, you may want to consider expedited services.Â Expedited services are available for many business entity documents filed in the Clerk’s Office including initial filings by corporations and limited liability companies, applications for authority to transact business in Virginia, amendments, mergers, withdrawals, cancellations, and terminations. The service also includes preclearance of certain documents before they are actually submitted for filing.

Expedited service is not available for filing of UCC financing statements, annual reports, service of process, and requests for copies of recorded documents. Fees range from $50 to $200 depending on the document type and the requested turn around time.

Next day service is available for all elibible documents at an added fee of $100.00.Â Same day service is available for eligible documents that are received in the Clerk’s Office by 12:00 noon for an added fee of $200.00.Â I rarely recommend same day service because in reality the result is not appreciably different for that extra $100 fee. For an additional $25, the Clerk’s Office will fax you evidence of an expedited document’s filing upon its acceptance.

To request expedited service, you must use the State Corporation Commission’s Expedited Service Request Form which can be downloaded from the Clerk’s website.Â The form has instructions on how to complete it and submit it properly.

I have mentioned before that certain States require "pre-approval" or registration of franchises before sales are allowed to residents of those States. So, which States are "registration" States? Here’s the list of the fifteen States that require franchise registration:

California

Hawaii

Illinois

Indiana

Maryland

Michigan

Minnesota

New York

North Dakota

Oregon

Rhode Island

South Dakota

Washington

Wisconsin; and, of course

Virginia

If you’re considering buying a franchise in any of the States mentioned above, the first thing you should do is check with your State regulatory organization to be sure the franchisor is properly registered to sell franchises.

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